tv Nightly Business Report PBS November 16, 2010 6:30pm-7:00pm EST
>> tom: you can't fight the fed, or can you? a group of leading economists and academics beg the federal reserve to reconsider buying billions of dollars worth of government bonds. >> susie: they're worried that by virtually printing money, the fed will boost inflation and undercut the dollar. coming up, we talk with a critic and a fed supporter. you're watching "nightly business report" for tuesday, november 16. this is "nightly business report" with susie gharib and tom hudson. "nightly business report"
a little hoarse tonight, battling a cold. a sharp selloff for wall street. stocks hit a three-week low on fresh criticism of the federal reserve's plan to pump up the economy by buying billions of dollars worth of treasury bonds. >> susie: tom, the latest opposition comes from two dozen leading economists, investment strategists and academics. they took out a full page ad in today's "wall street journal" under the banner "economic policies for the 21st century." they're urging ben bernanke to re-think the fed's $600 billion bond buying plan. >> tom: in an open letter to the fed chairman, they write, "the planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the fed's objective of promoting employment." instead of further action by the fed, the authors want improvements in tax, spending and regulatory policies. >> susie: so is the fed's plan flawed? we get two points of view. signers of that letter to
this money. the other, we get too much inflation and it debases the dollar. >> let's get alan into the conversation. you wrote under the title "in defense of ben bernanke." give us a counterargument. >> i think the coming up next on argument is pride simple. we have a an economy growing much too slowly. the unemployment rate is very high and not coming down, and on central forecast is not going to come down for a while. fiscal policies completely paralyzed or worse. so if anything is going to push this wagon forward, this big economy forward, it is going to be the federal reserve. i think that's the way the fed thinks about it. not that it has this super powerful weapon, qe-2, but it is doing what it can to push the economy forward, and i think they should.
>> susie: if you're worried that this plan, though, could push up inflation, but isn't a little bit of inflation a good thing. isn't everyone saying they're worried about deflation these days? >> i don't think a little bit of inflation people now reviewing the depression argue that one of the biggest mistakes was not letting prices go down. >> susie: alan, what do you say to that, and what
do you say as to what is going on with the dollar. the u.s. dollar index has dropped 4.5% only since this summer. there are a lot of concerns that the plans of the fed is going to damage our currency. >> it might or might not. nobody has mentioned in this recent debate that the dollar has been rising for the last two weeks. i don't think that is because of the fed's policy. the point is lots of things move the dollar. in this case, it is mostly european events that are moving the dollar. as to this point about growth around 2.5%, the key thing to understand, which everybody does understand, we're in a very deep hole. we need to climb out of that hole. then we can get on a 2.5%, or something like that, growth track. but it is going to take a lot of years of growth well above 2.5% -- which, by the way, doesn't seem to be in prospect -- to get us back to where we should be. we need to grow fast, and
that's why the economy needs some stimulus. go ahead. >> susie: you said in your op ed piece this plan is not fool-proof or perfect? >> right. >> susie: what would you tell your former fed colleagues, what they should do to fix the economy? >> one of the risks that dick mentioned at the outside, i think is a real risk. it is just a too weak a medicine, and you buy the securities and the banks just hold on to them. in that case, you don't get anything out of it. you don't get inflation either, but you don't get a stimulus to growth. there is a danger that this is a weak weapon. i would tell them, and i have told my friends at the fed, and i mentioned in the wall street journal piece that you mentioned, susie, i would rather see the fed buying private sector securities. putting that money right into the private sector. there are some restrictions. they can't just do anything, but they can do something.
and i would like to see them lower, even to negative amounts, the interest that they pay banks for holding idle reserves. >> susie: a lot of people are watching this program may not understand the complexities of this argument, and what is going to work and what is not going to work. all they want to know is what is it going to take to bring people jobs andet employment to really drop. i think we're looking at three to five years before we see a meaningful drop in the unemployment rates. >> susie: alan, we just have a few seconds left.
>> i think that is vastly too long to job. i have a good job, but millions of americans don't. i think the fed should be throwing everything it has at getting the economy to grow faster. >> susie: okay. we're going to leave it there. gentlemen, thank you so much for coming on the program. >> thank you. >> thank you. >> susan: we've been speaking to dick bove and alan blunder. >> tom: here are the stories in tonight's n.b.r. newswheel: as we mentioned, stocks tumbled on worries about the fed and european debt. the dow dropped 178 points, the nasdaq lost almost 44. the s-and-p 500 down 19. trading volume picked up, with over a billion shares on the big board, over two billion on the nasdaq. the selling came despite tame prices at the wholesale level. producer prices were up in october on higher oil prices. but take out energy, and prices actually posted their biggest drop in four years-- down 0.6%. g.m. is on deck for the biggest i.p.o. in u.s. history.
expected to raise over $22 billion. the automaker will boost the size of its offering by 30%, to 478 million shares. the shares will go for between $32 and $33 each. meanwhile, a car g.m. is pinning comeback hopes on, the chevy volt, today won the coveted "car of the year" crown from motortrend. still ahead, tonight's "word on the street" is "gold." with prices still over $1,300 an ounce, miners may be looking for buyouts. should you? thestreet.com's alix steel joins us. >> susie: positive news from the teen apparel sector is raising hopes for holiday sales. abercrombie & fitch reported a 29% increase in third quarter profits, but profit margins were hurt by heavy discounting. erika miller has more on whether merchants will see more green from teens this holiday season. >> reporter: at this charlotte russe store in manhattan today, customers were shopping for clothing and accessories. teen purchases are not just a predictor of fashion trends.
retail analyst eric beder says they are also a barometer of discretionary spending overall. >> teen have tremendous amounts of discretionary income. their food, board and pretty much everything else is paid for by their parents. so really what the teens do with their money is they spend it. >> reporter: teen retailers were once believed to be recession proof. but the great recession changed that. these stores have suffered along with oth the weak economy also means parents are less willing-- or able-- to part with spending money. as a result, promotions are likely to be a major driver of sales this holiday season. many analysts believe aeropostale will be a star performer. it's the only teen retail stock eric beder is recommending. >> aeropostale has been the low priced leader. they are the best-run company in terms of operating metrics, in terms of standards of performance, in terms of productivity. >> reporter: but s&p analyst
marie driscoll thinks urban outfitters and abercrombie & fitch are the better stocks to buy. >> both are making focused efforts to grow internationally. both of them have seasoned management teams that are executing internationally. >> reporter: for the sector as a whole, most analysts see holiday sales rising 2% or 3%. if sales are better, it will be more than just good news for teen stores. >> if we see the teen segment start to really come back, you'll see that i think people are becoming much more positive about the economy, they're looking to spend more money. so i mean this is really one of the segments you really need to pay attention to. if it really starts to sizzle, you are going to see the rest of the retailing world start to move with it. >> reporter: so, the next time your teen buys clothes, it may be more than a fashion statement. it may be an economic statement as well. erika miller, "nightly business report," new york.
>> susie: beatle-mania is coming to apple, as the fab four's music catalog is finally available on itunes. it's the first time music fans have been able to buy their favorite beatles songs through apple's online music store. all 13 beatles albums are available for $13 each. double albums are $20 and individual tracks cost $1.29. the release of the band's music online marks the end of a long journey for the beatles' record company, e.m.i., and apple. the two battled in courtrooms for years over a trademark
dispute. tom it seems like fans were ready for these two sides to come together. on their first day on itunes, 11 beatles songs were in the list of top downloads. >> tom: susie, it's also good news for e.m.i. now that the fab four have a "ticket to ride" on itunes, the company gets a possible short-term solution to its debt issues. >> susie: but tom, that good development didn't inspire investors on what was a difficult day for the markets. >> tom: the market rally that began in august has clearly run into some selling pressure. today's drop was the steepest in almost a month. we begin with the intraday chart of the s&p 500. the index hit its lowest level of the day about 45 minutes before the closing bell. pulling out to a longer view--
one year-- we can see the rally from august through early this month when it hit a post- recession high. twice now, the index has turned back from around the 1,220 level. the index is down about 4% off its high a week and a half ago. the selling picked up today over continued criticism over the federal reserve's latest effort to stimulate the u.s. economy and building worries china may take more steps to cool its economy. the china talk hit the ishares china exchange traded fund. it fell another 3%. it has now lost 8% in the past week. china raised interest rates a month ago and talk of another possible increase hit commodity prices today. corn, soybeans and copper each fell about 5%. the u.s. is a big exporter of corn and soybeans. china is a major customer for those as well as for copper. all ten s&p sectors were down at least 1%. but with the commodity sell-off, the material and energy sectors saw the biggest drops.
gold and copper miner freeport mcmoran fell 4% on strong volume. steel maker allegheny shed almost as much. in energy, coal company consol fell almost 5% and gasoline refiner valero was down almost 4%. each of the energy stocks fell on twice their usual volume. a couple of bright spots came from two dow industrial components reporting earnings, home depot and wal-mart. home depot's results were three cents better than estimates. sales and margins were up and home depot increased its outlook. shares of h-d were the best performing among the dow 30 stocks, rising 1% on better than two times its average volume. the stock hasn't traded over $32 a share since june. wal mart, meantime, was the only other dow industrial component in the green today, up 0.5%. wal-mart volume was also about twice its average. earnings came in as expected, even though u.s. same-store sales were down for the sixth straight quarter. international sales drove the earnings growth and helped
mart increase its outlook for the year. a few other retailers moving today. dick's sporting goods jumped 12% on heavy volume. this is a three-year high. margins and sales improved and it raised its outlook. this helped hibbett sports rise 3%. its earnings are due friday. and urban outfitters was up almost 12% even though revenues were lighter than anticipated. analysts, though, called the conference call with company executives upbeat. boeing shares have taken a hit in the past week over worries about the possibility of yet another delay of its new 787 dreamliner plane. boeing says one of its test planes had an uneventful flight today. but that follows an in-flight fire on a 787 last week. so far, boeing has not changed its mid-february delivery date for the first commercial 787 to all nippon airways. shares dropped another 1% today. this is boeing's lowest price since september. and that's tonight's "market focus." e get 100% interest.
some analysts don't me. >> tom: our guest this evening, it is alix steel with thestreet.com. >> susie: let's take a look what we're watching for you tomorrow. >> susie: here's what we're watching for tomorrow: quarterly results from applied materials and limited brands come out, along with october's consumer price index. and general motors is expected to price its initial public
offering. speaking of i.p.o.s, some of the best-performing new stocks this year have come from china. our "street critique" looks at chinese i.p.o.s in the u.s. if you've ever been a t.d. ameritrade customer, there could be cash coming your way. the online brokerage will offer up to $2,500 each to six million current and former customers. the money is part of a settlement after a security breach in 2007. anyone who held an ameritrade account or gave an e-mail address to the company before then could have been affected. a hearing on the settlement is scheduled for next month. >> tom: the tax man today dropped a lawsuit against u.b.s. the move came after the swiss bank handed over the names of 4,000 american account holders. the i.r.s. says each and every one of those people can expect a full audit, unless they're among the 15,000 people that came forward during a voluntary disclosure program. the i.r.s. and u.b.s. reached a deal on tax cheats last year,
but the swiss bank dragged its feet on handing over names tied to hidden accounts. >> susie: as we mentioned, the federal reserve's plan to pump billions of dollars into the financial system has hit a wall of criticism. tonight's commentator has some thoughts on what the fed can and can't accomplish. he's allan sloan, senior editor at large at "fortune."
>> people are used to thinking of the federal reserve as an all-powerful institution that can raise or lower interest rates and determine what happens to the u.s. economy. but that's not true. look around these days, and you see that the fed is having problems implementing its new strategy, called "quantitative easing 2," which translates into, "printing a lot of money." the idea is that if the fed buys $600 billion of treasury securities, on top of the $1 trillion it bought earlier, long term rates will fall. the u.s. dollar will drop gradually. our economy will be more competitive, and add jobs. life will be grand. but for the first time that i remember, the fed is being attacked in a high-profile ad campaign. clearly, the republicans mounting the attacks think the fed is vulnerable. even before that, markets were moving against the fed. commodity prices rose sharply the fed board is
on "qe2." or to countries whose support we need to keep the dollar from crashing. i don't know if the fed can pull off qe2. i'm not sure the fed knows, either. and the partisan attack sure complicates things. there's a big difference between being powerful, which the fed is, and being all powerful. which it certainly isn't. i'm allan sloan. >> susie: that's "nightly business report" for tuesday, november 16. i'm susie gharib. good night everyone, and good night to you too, tom. >> tom: good night susie. i'm tom hudson. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: